Keydata: Norwich & Peterborough appeals ombudsman ruling

Aren't they part of HBoS?

N&P should obey the ombudsman. These people are like the banks. They want all the profits from their actions with none of the responsibilities. If and when they are made to honour their responsibilities maybe they, and others like them will carry out proper risk assessments of their recommendations rather than heading for the hills when things go wrong.

I am a relative of a Keydata victim - mis sold by N&P - N&P should honour their commitments and stop stalling - they had some pretty good times on the back of this and they aggressively sold the bonds without due diligence or considering the degree of risk. The victims were told these were "as safe as houses"...

N&P has a media strategy of appearing cuddly. It would have been better if they had stuck to that rather than indulging in structured products which they had no chance of understanding - let alone assessing the risks of default. Norwich & Peterborough was simply out of its depth but saw a commission opportunity.

The Ombudsman has always said that while individuals can challenge decisions through the courts, firms have to abide by rulings. Here it seems not, destroying the ombudsman system.

And what does this say about Norwich & Peterborough's finances?

Apart from the mis-selling issue, it seems to me to be incumbent on an investment advisor to maintain an eagle eye on the investments he has recommended. From what I read, there was something of a bad smell from the drains about Keydata for quite a while which an on-the-ball financial community member ought to have been sensitive to. i also understand that there was an exit route, albeit at a slight loss, from Keydata so an investment advisor could have recouped the situation to a great degree if he had been vigilant.

If N&P are made to pay compensation, what about other IFAs who have sold identical Keydata products?

I have transferred a substantial balance of cash ISA's with N&P for myself and my wife to HSBC. N&P's handling of this matter has been a PR disaster. Suggest depositors vote with their cheque books.

@headhuntter77

No - N&P is a building society still owned by its members.

@colin grant

N&P will be legally obliged to obey the Ombudsman's final decision as and when it issued and there is no appeal other than for judicial review.

It is clear, though that it has not yet been. It is possible that the Ombudsman has issued a provisional decision and that still allows N&P to make further representation.

I suspect, though, that it has only been issued by an adjudicator. Either side can refer an adjudicator's decision to an Ombudsman.

The case is complex because the loss does not, in itself, mean that the adviser was at fault. They are entitled to rely on what a provider (or, for that matter, a customer) tells them unless it is manifestly untrue or inaccurate.

Therefore, if Keydata misrepresented the product to N&P it would have a valid defence.

I appreciate that I am speculating here and N&P may not have been sufficiently diligent in its advice but my point is that there may be other issues that we do not know about.

Headhunter77 - N&P are an independent Mutal Building Society - nothing to do with HBoS.

Looks like N&P are intending to drag this out with the FOS. This could take months. Interested parties should study the technicalities of the FOS process.They publish in paper form & on line Consumer Fact Sheets. "How we deal with your case" & "What a 'final decision' by an Ombudsman means" are the relevant ones.

I assume an Adjudicator has suggested the £28,000 settlement. Both sides can appeal to the Ombudsman after that. Only then is the "final decision" binding on N&P. However it shows what kind of people N&P are that they do not go along with what the Adjudicator has said. No doubt in the appeal N&P will be getting expensive technical advice. What chance do the little people have in this whole debacle?

"Fair weather friends" as usual.

All smiles and pleasantries when you are buying something.

Then look how they dive for cover when the going gets rough.

The BBC tell us the Adjudicator said:

The FOS ruling says the N&P wrongly advised the couple to invest more than 40% of their savings in the investments - second-hand life insurance policies from the US - that were too risky for their circumstances.

"The fund's underlying mixture of assets exposes [the clients'] capital to a greater degree of risk than they were likely to be willing to accept," the FOS adjudicator said.

"I do not believe that [the clients] would have invested in this product, had they been fully aware of the risks."

Typical - N&P have always tried to duck the issue and blame the debacle on Keydata. After eight weeks of sitting on my complaint they were "unable to respond". They missed the point that I was complaining about mis selling - total irrelevance to what is happening or not re Key data!

How many firms both large and small could be declared in default over the 'structured products' debacle?

Just what responsibility do these firms accept?

The sole reason we use these advisors is because they pretend to know more than we do

They claim (when selling) that they have huge amounts of expertise and give impartial well researched advice and continually monitor the market.

They assess our attitude to risk on a scale and having found that we are seeking a return better than base rate ask us to sign up as an experienced investor ( shift responsibility to us)

Then they take their initial and trail commission year after year and, when they have done a dodgy deal it's OUR fault!

They sold a product not fit for purpose. The company is not fit for purpose.

They should pay up in full & stop whining.

If they want to do something to defray their losses stop the bonuses and issue P45s to the clowns that claimed to be managing the Keydata account.

Redfish - agree! N&P took a sizeable chunk of commission - advised my relative to invest way beyond the compensation limits in one bond saying it was as save as houses and never once mentioned assets in Luxembourg. The vast majority of Keydata victims who invested via N&P were retired and elderly with precious savings built up over time - they were not "professional investors" they were advised and paid for that advice - it is disgusting that N&P are now allowed to stall the process and hide behind some technicality! Most of these people do not have time on their side they need the money now. I would urge people to withdraw money from N&P - this is the way they treat investors......

Stay away from N&P they will not take responsibility for any of their actions however incompetent they are.

I'm a bit puzzled.

We have had Regulatory Legal persuading us that they are representing the advisory industry to seek a judicial review of the decision of the FSCS to describe Keydata as an IFA. This is to avoid all of the FSCS costs landing on us.

Now I learn that RL are also representing investors trying to seek compensation out of an IFA (N&P).

It rather sounds like they are not quite so much on our side after all.

I'm not sure if I altogether trust them! Is this a conflict of interest?

Any other IFAs got a view?

@ Magda: Meow

22 August 2010

I am just after writing in a complaint to FOS against a broker, and so I do thank all those who made helpful comments on the subject. Acting on advice from one of bloggers I quickly went over relevant sections of FOS’s website, and also looked up a decided case on this issue on the Internet. The judgement title

“Ulster Bank Investment Funds Limited V Financial services OmbudsmanNeutral Citation”.

First, briefly FOS decision is final.

As regards the case law cited above, it seems to say that FOS can be made a party to an appeal under certain conditions:

To begin with appeal will on the question of law and presumably not on the question of fact.

Secondly, who can appeal? It seems to say it will be either FOS itself or complainant. I did not have time search if business can take the initiative to appeal.

I would have inconceivable if FOS’s adjudicator and FOS ignore a genuine business concern about the relevance of the law being applied. Even so, it seems to me that it won’t the business but either the FOS or complainant who It seems FOS can only be a party to an appeal in these circumstances.

would be allowed to appeal to the high court.

David Bhatti

David I think there is a little confusion over the term appeal. This is not an appeal to a Court. The FOS have hundreds of Adjudicators. An Adjudicator has given a ruling .Normal organisations accept the ruling & pay up. N&P can now "appeal" to an Ombudsman . There are 10 of these employed by FOS. Once an Ombudsman decided, that is that (unless as you say there is a point of law). N&P must pay or the claimant can recover the money as a debt in Civil Court. The point of law could only be that the FOS have not proceeded in accordance with the rules laid down by the Financial Services Act 2000. It is highly unlikely the FOS would make a mistake here. Parliament wanted such disputes to be determined outside the Court system to assist the claimant & make it simple.

I cannot understand why correspondents are challenging the actions, inactions, procrastination or decisions of the N&P Building Society.

Surely everyone, or at the very least their hapless Keydatya investors, by now realise that the N&P lot consider themselves invinsible and, CEO Matthew Bullock, the King Canute of the finacial world?

Of course with 25,000 people involved there might well have been some cases of bad advice.

But no one yet seems to have worked out what was the real problem with the Keydata/Lifemark set up.

It's simple, and best illustrated by reference to the most simple and most obvious case - an investor in one of the early Secure Income Plans..

Let's take Secure Income Plan1. Many investors liked the prospect of a steady monthly income, money back in 5 or 7 years, and no stock market exposure. That was the Keydata contractual deal

What we did not know was that our savings in 2006 were going into a totally empty bucket called Lifemark (with a hole in the bottom called LAS Global).

That fund had absolutely no chance whatsoever of delivering the contractual obligations of Keydata to SIP 1 investors.(even without the LAS Global hole -but even less chance with it)

Why? Because in order to have any chance of doing that, Keydata/Lifemark would need to attract the future savings of further unnamed 10s of thousands of other pensioners just like us, totalling many hundreds of millions of their savings, before it was anywhere near big enough for the statistical and actuarial Life Settlements model to have any chance of working.

We were throwing our savings into a massive empty bucket.

Fast forward three years - SIPs 2,3,4... to 14, and then Defined Income Plans 1 ,2,3....to 8 etc. etc all "successfully" launched and sold (you get the idea) .

Now we have £350M invested and 25,000 of said pensioners on board AND THE FUND IS STILL NOT BIG ENOUGH TO BE SELF SUSTAINING or to deliver what has been contracted to all those pensioners.

Who says so? - the man now running Lifemark (in Administration) says so. And so do I - and so will anyone else who has spent the last year trying to flush out what the hell has happened here.

The people responsible for Keydata and Lifemark (and LAS Global for that matter) knew that. Actually - that would be the same person wouldn't it?

But none of said pensioners throwing their hard earned savings into that big bucket knew that . Because nobody bothered to tell them they were investing in a shell fund, an empty bucket and a high risk start-up fund.

Why high risk? because if the cash flowing in through 2007,2008, 2009, 2010, 2011 was disrupted for some reason (like FSA intervention - or at least six other good reasons I could come up with) the whole set up was likely to collapse.

Just like it has done.

We were not told of that risk.

I call that "Misrepresentation".

No - it's "Willful Misrepresentation" if Keydata knew about this little problem and didn't tell us.

And if it was done with intent to gain from it - it would be "Fraudulent Misrepresentation" - would it not?

LAS Global took $60M straight of the top of our savings in cash, right up front, and now held in a Ford Family Trust. That sounds like a bit of a gain to me.

How about a bit of compensation then, FSCS?

But everything seemed to be working well untill the FSA intervened in June 2009. It was for me anyway - never a monthly income payment late - never mind missed.

At that time there was £350M invested - the savings of about 25,000 people - mainly pensioners looking for a steady income and no stock market exposure. It may not have yet been big enough to be called a "mature" fund but it was a hell of a lot of people's savingsfor th3e FSA to be playing Russian roulette with..

It seems to me that the way in which the FSA went about the Administration was bound to cause the absolutre maximum damage to the existing investors (although the justification they used for their actions was to "protect us"!!!)

It was a bit like taking a going concern Dairy Farm into administration without bothering to find out how the cattle were going to be fed ( worse - even having no idea at all that they actually needed to be fed.)

And so the cattle (the only assets of the Farm with any value) get skinny, worthless and then die.

And then the Administrator wonders why we've all lost our savings - and the Administrator blames the Farmer - who may not have been too clever and he may have cut a few corners with the taxman - but he did at least feed the cattle.

I don't think the FSA or PwC had any idea how to keep our Life Settlement Fund from withering away - just like the cattle.

And that is just about what has been happening. There was absolutely no need for it to be like this. It was crass stupidity, incompetence and negligence post Administration which a has done the majority of the damage to the existing 25,000 investors' savings. Does anybody CARE?